Saratoga’s Racing and Gaming Conference Set to Return

After a two-year absence, the Racing and Gaming Conference is back. The two-day conference will kick off Aug. 16 and will be held in the 1863 Club on the grounds of Saratoga Race Course.

With the goal of examining industry trends and challenges facing the sport, the conference was known for bringing together notable industry leaders from across a wide spectrum, including racing officials, regulators and politicians. This year, more than 40 gaming and racing industry professionals will participate in 14 sessions as speakers and panelists throughout the two days.

The conference will begin with a panel called “Putting on the Big Show, What's New and What's Next at NYRA,” which will feature David O'Rourke, the chief executive officer and president of the New York Racing Association. That will be followed by a session entitled “Horseracing Integrity and Safety Act: What is in it and Why is it important to the Industry?” It will be moderated by Bennett Liebman, Government Lawyer in Residence at Albany Law School, and the panelists will be Alan Foreman, Pat Cummings and Pete Sacopulos. Monday's agenda also includes what should be an important look at the “decoupling” problem. Decoupling is an effort by casino companies to keep their gaming licenses without having to conduct live racing.

On the 16th, Bill Pascrell III, Partner, Princeton Public Affairs Group, will host a panel called “Parimutuel Wagering in the New Sports Betting Landscape.” Panelists will include Dennis Drazin, who heads the management team at Monmouth Park and played an integral role in the fight to overturn The Professional and Amateur Sports Protection Act.

Patrick Brown, co-founder of the Brown & Weinraub law firm in Albany and who serves as a member of the Albany Law School, Government Law Center Advisory Board, will serve as conference director after having been a conference participant for many years. Brown has worked extensively with Leibman, who ran the conference while it was under the direction of the Albany Law School.

To learn more about the conference got to https://racingandgamingsaratoga.com.

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The Friday Show Presented By Monmouth Park: Sports Betting And Fixed Odds On Horses

Sports betting has shown steady growth across the United States in the three years since the Supreme Court overturned a federal ban on the activity, with more than $53 billion legally wagered on sports since June 2018.

More and more states are authorizing sports betting, with Canada close to approval as well. New Jersey lawmakers have recently passed legislation that would permit fixed odds wagering on horse racing, allowing bookmakers there to set betting prices on horses as they do on baseball, football and other sports.

Are there opportunities for horse racing to grow, even though the amount already being wagered on sports far exceeds horse racing's annual betting handle? While fixed odds wagering opens up new types of bets and guaranteed payoffs, could it  have unintended consequences on racing's traditional pari-mutuel pools or on the computer-assisted “whales” who get rebates in return for their betting volume?

To discuss these and other issues, Pat Cummings, executive director of the Thoroughbred Idea Foundation (www.racingthinktank.com), joins Ray Paulick and Joe Nevills in this week's edition of the Friday Show. Ray and Joe also review Woodbine's Star of the Week, LNJ Foxwoods' Boardwalk, a Constitution filly who won her first graded stakes last week in the Whimsical Stakes.

Watch this week's show, presented by Monmouth Park, below:

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TIF: How Will Racing Pay for HISA? Grow the Business!

by Thoroughbred Idea Foundation

The creation of the Horseracing Integrity and Safety Authority (HISA) is the most significant development in American racing at the federal level since the passage of the Interstate Horseracing Act in 1978.

Questions now being rightly considered include how much HISA will cost and where will its funding originate from. Below, we offer some perspective on the costs. But as the greater industry determines where the funding will come from over time, racing should proactively adopt policies which seek to grow the wagering business.

The industry already has a plethora of obligations–aftercare, backstretch programs, integrity matters, jockey health and equine research, not to mention purses, the main driver for investment from owners. HISA adds to these. The best way for horse racing to afford all of its obligations is to grow the business.

Racing’s wagering business needs to evolve–appropriate pricing of bets, improving access and reducing costs to accurate data, complementing pari-mutuel betting with fixed odds options, modernizing existing bet processing and infrastructure, all while increasing transparency to the public in many areas. Increasing costs to our already fragile wagering markets, or to a declining base of horse owners, without these needed improvements is a recipe for disaster.

Any step where costs to betting are increased to help pay for HISA programs will hurt the greater racing business.

Projecting Costs

There is every reason to expect that a new level of federal bureaucracy functioning on top of individual state commissions will be expensive.

As it relates to testing, these expenses are fairly clear. For example, if the per-race spending on testing alone from the more than 5,000 races across all breeds overseen by the California Horse Racing Board were extrapolated across the entirety of U.S. Thoroughbred racing, nationwide testing alone would run approximately $20 million annually at current standards.

This is a cost already borne by individual commissions.

Factoring in improvements and upgraded requirements, it should be understood that the $20 million–just for testing–merely represents a starting point.

Administratively, what it will cost to start a federal authority from scratch is more challenging to envision. The HISA creates a layer of federal bureaucracy where one never previously existed. This isn’t necessarily good or bad, it is a reality in development with little insight on costs to this point.

HISA requires the registration of all “covered persons”–an umbrella term which, according to the language of the bill, includes “all trainers, owners, breeders, jockeys, racetracks, veterinarians, persons (legal and natural) licensed by a State racing commission and the agents, assigns, and employees of such persons and other horse support personnel who are engaged in the care, training, or racing of covered horses [basically, all active Thoroughbreds].”

Most are already licensed by existing commissions, but some are not. Will that information be shared or require completely new registrations? The exact administrative requirements are (understandably) unknown to this point, but all of this will come with costs.

The United States Anti-Doping Agency (USADA), which will assist in the development of HISA, serves as a potential reference point to understand the possible administrative expenses.

According to its annual report, USADA conducted more than 14,000 tests in 2019 across various groups which include America’s Olympic and Paralympic athletes, services to the UFC or contracted services for other events, such as the Boston and New York City Marathons. Off a base of just 30,000 Thoroughbred races, down from 36,000 run in 2019, it is reasonable to expect the number of annual tests in U.S. Thoroughbred racing would be no less than five times larger than those conducted by USADA, and very likely more.

USADA’s testing costs in 2019 ran more than $13.5 million, but non-testing expenses, which includes results management, science, research and development and drug reference, education and awareness, as well as general and administrative expenses totaled an additional $9.3 million.

It would be reasonable to estimate that HISA’s costs would be similar, if not more, given a substantially increased number of tests, across a far larger base of competitors and events (races) requiring tests.

Whatever the exact costs, it will be more than in pre-HISA times.

Grow the Business

The best chance racing has of covering HISA costs is if racing finds a way to actually grow the business, turning around two decades of decline.

Grow the business. Grow the business. Grow the business.

State commissions are, for the most part, funded through fees assessed to, or withheld from, the sport’s participants. Receiving a portion of the hold from wagering takeout is one source of funding, licensing fees and starter fees are another. Some receive funding through a share of alternative gaming revenue too.

If wagering on racing continues to decline, recalling that it has dropped roughly 50% adjusted for inflation over nearly the last two decades, the ability to pay for HISA and plenty of other programs required of the industry–aftercare initiatives, jockey health, equine research, among others–would grow increasingly difficult. Takeout hikes would be a completely counterproductive measure to pay for HISA as betting churn would decline.

The path to a brighter future, where the industry’s liabilities can be covered, is wagering growth.

More wagering on racing yields a more sustainable business for all stakeholders. But yet, many of the decisions made by racing operators over the last two decades have been in opposition to growing wagering on racing. This has to change.

Whether it is the continuation of churn-killing jackpot bets, high takeout rates, an aversion from many to exploring fixed-odds options, or continuing to operate antiquated pari-mutuel bet-processing systems without modernization–these and other actions have greatly limited racing’s growth, all as the sport’s liabilities increase and its social license to operate becomes tougher to retain.

As racing and humanity emerge from a troubling calendar year, make no mistake that 2020 was a year of tremendous growth in legal sports betting. Those states doing the best with sports betting are those which have embraced online betting and competitive markets. While the overall environment for betting has never been stronger, racing’s wagering product remains stagnant.

If racing wants to succeed, and cover its growing liabilities which now include HISA, it must undertake measures to radically improve–and grow–the wagering business.

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TIF: There’s Still Time To Make Handle A Top Priority For Racing

Racing needs a long-term plan which will put the sport on a path to raise handle to nearly $50 billion annually with more than $5 billion held by the industry by 2040.

Sound optimistic?

Falling well short of that goal would still be a monumental accomplishment given we are on track for another year at just $11 billion in handle, and down nearly 50% in the last two decades, adjusted for inflation.

So where are the plans from the industry to start thinking long-term about not just surviving, but thriving, and building a robust, wagering-forward industry?

Horse racing has a tremendous opportunity to lean into a massive culture of betting liberalization, but it has otherwise failed to capitalize on it. Time is still there, and the opportunity is not yet lost.

There is no doubt horsemen should be thankful for the enrichment they've received through purses over the last two decades coming by way of slot machines, video lottery terminals, historical horse racing or other revenue sharing from casino-related operations. In many cases, tracks and horsemen lobbied relentlessly for them. It makes sense that they continue to fight for them, but not at the expense of racing's most obvious source of sustainable revenue – actual wagering on racing.

These significant purse supplements have allowed the industry to minimize the importance of presenting a modern wagering product. Most tracks have not focused on making racing wagering more competitive and most horsemen's groups have not advocated for meaningful improvements to stoke wagering, either.

In some cases, 90% of prize money has come from subsidized sources beyond racing, wagering on the sport has not seemed as important – a reality which is reflected in annual handle figures over the last 20 years. Many owners and trainers within horsemen's groups do not possess a detailed understanding of racing wagering. They don't know what to advocate for to improve their own futures.

This is problematic, because as it relates to prize money for racing, the future is not bright.

Subsidies to racing from gambling beyond racing, in whatever form they take in states that have long enjoyed them, are changing. Some states are in worse shape than others. The pain of the industry's likely contraction will be widespread.

Horsemen cannot just want a bigger slice of a shrinking pie, it must advocate for growing the pie so that the slices grow for all parties.

Existing groups – including TOBA, state THAs, HBPAs and others – must begin to develop a meaningful strategic plan. Transformational steps to ensure the best possible future for racing must be embraced. At the forefront, a radical rehabilitation of wagering on racing is needed. No ideas should be off the table.

The sport is in no position to turn away from unexplored revenue streams or customer bases. Fixed odds betting on American racing is evolving, albeit slowly, and while there is no denying that the cut from fixed odds betting to tracks and purses is smaller than that provided by pari-mutuel wagering, ignoring the fastest growing legal wagering opportunity in modern American history cannot be an option. Racing's path through fixed odds must be navigated delicately and adjusted over time, but racing needs to be co-located with all other wagering opportunities.

Racing can make its pari-mutuel offerings better and get its wagering product in front of far more customers. The question, of course for all of this, is in the specifics. How?

The sport needs short, intermediate and long-term strategic planning, identifying and plotting courses to achieve goals over the next 10, 20 and 30 years.

Racing had no such plan in 1990 when annual wagering was an inflation-adjusted $18 billion and a decade later, topped $21 billion, also when adjusted for inflation. But what has happened in the intervening two decades is a mass legalization of wagering opportunities combined with significant technological innovations and a substantial increase in personal entertainment options. Racing has to compete if we are to preserve our sport, let alone grow it.

Where are the attempts to voraciously advocate for a most robust wagering offering for our sport which will likely rely far more on it in the next 20 years than it has in the past 20 years?

Just because we lack a centralized structure to oversee an industry master plan does not mean that those groups which exist now are hamstrung from starting one. Owners, breeders and all horsemen should be as interested in growing wagering as anything else they do. Many don't have the first clue where to start, and while unfortunate, it's understandable. There should be no further delays in correcting our course.

The Thoroughbred Idea Foundation was launched to advocate for progressive change in racing because we believe it is possible to turn the sport around.

With a concerted effort, racing could double handle in the next ten years, and double it again in another decade, but only if changes are adopted which would offer more realistic pricing of pari-mutuel wagers, complement tote wagering with fixed odds betting, modernize technology, improve access to data and substantially increase transparency across the sport.

Racing must be more open in reporting on the business of betting – where it is coming from, what it contributes to purses and how it has changed over time. This movement should be driven by owners. Racetracks have proven insufficient leaders of the sport and industry organizations have been distracted by other topics. Nothing should be more top of mind than how we fund our business and keep racing viable.

Racing needs a new generation of horsemen's leadership to propel it forward. Those who might not think it is the role of horsemen to relentlessly pursue improving the wagering business should think again – their role is federally protected by the Interstate Horseracing Act and should be the envy of any professional sporting endeavor in the country. Racing needs increased wagering to survive, let alone thrive.

The business of betting has been ignored for far too long. A new future for the sport promotes a modern wagering business at the heart of racing.

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